Monday, Burberry shares dropped after the U.K. luxury fashion group said it would cut its dividends and issue a profit warning. It also said it would be replacing its CEO.
In a trading update, the company that makes the famous trench coat BRBY, -17.05% talked about a “disappointing” fiscal first-quarter 2025. Burberry said that its retail sales dropped 22% year-over-year to £458 million ($593 million) in the 13 weeks ending in June. Comparable same-store sales fell 21% from an 18% rise the previous year. The report said that currencies were a 2% headwind.
Gerry Murphy, the chair of Burberry, said that the company was finding the luxury market “more challenging than expected” as the weakness in the last few months of 2025 got worse. “The weakness we talked about at the start of FY25 [full year 2025] has gotten worse, and we expect to have an operating loss for the first half if things keep going this way through Q2 [second quarter].”
The company Burberry said that “a backdrop of slowing luxury demand” hit all regions during that time. The biggest drop was in the Asia-Pacific region, with sales down 21% in mainland China, 38% in South Asia-Pacific, and 26% in South Korea. However, sales went up 6% in Japan. East, Middle East, India, and Africa (EMEIA) saw a 16% drop, and the Americas saw a 23% drop.
The warning comes after the company reported a drop in profits for fiscal year 2024 in May.
Burberry also announced that Joshua Schulman would take over as CEO and executive director from Jonathan Akeroyd “immediately,” along with the suspension of its fiscal 2025 dividend. Burberry told people about Schulman’s “extensive” experience in high-end fashion. Schulman is American and was CEO of Michael Kors from 2021 to 2022 and brand president at Coach from 2017 to 2020.
For the second half of the year, Murphy said the company would also start cutting costs to “strengthen our competitive position and underpin long-term growth.” Burberry thinks that its wholesale sales will drop 25% in the first half of 2025 and 30% for the whole year. This is because the company will have to spend about £150 million on new equipment and deal with a currency headwind of £55 million.
Burberry shares had the worst day in London and all of Europe, falling 11% and losing 44% so far this year.
Investors are likely to say, “Show me,” and then sit back and wait to see where the new CEO wants to take the company and what its main goals will be. This is not a surprise for brands that are changing, like Burberry, to have trouble in a market that is not doing well, said a group of analysts at Bernstein led by Luca Solca.
Solca and his team made it clear that Burberry’s “attempted upmarket repositioning had failed,” along with a relaunch led by creative director Daniel Lee. This is because the brand’s high-end items have been marked down a lot.
“This is the perfect kitchen sink exercise,” said Chris Beauchamp, chief market analyst at IG, in a note to clients. “It shows how big of a problem Burberry has in a world where Chinese sales can’t be taken for granted.”
Companies that make luxury goods are still having a hard time in one of their biggest markets. China’s economy grew at a slower-than-expected 4.7% annual rate in the last quarter, which was much slower than the 5.3% growth seen in the first quarter. The data came out on Sunday.
Another bad news for the luxury market on Monday came from Swatch UHR, -10.10%, which said its first-half sales dropped because of low demand for its high-end watches in China. The company said it thinks the market will stay tough until the end of 2024. Swatch’s stock fell 10%, making its losses for the year so far 25%.
